Prada Initial Offering Said Set to Raise Up to $2.6 Billion

Italian fashion house Prada is pricing its initial public offering in Hong Kong to raise up to $2.6 billion and give the maker of luxury bags and Miu Miu dresses a value higher than its European peers, a source said.

Prada set an indicative price range of HK$36.5 to HK$48 a share for the IPO as it started meetings with Asian investors to gauge appetite for the deal, a source with direct knowledge of the plans told Reuters on Monday.

The IPO is being priced at 27 times projected 2011 earnings at the top end of the range, the source said, higher than the average of European top luxury groups such as Tod's, Burberry, and LVMH.

The source declined to be identified because the details have not been made public. Prada was could not be reached for comment.

Prada, which repeatedly scrapped plans for an IPO over the past decade, is the first Italian company to float in Hong Kong -- underscoring the weight of the Asian market, which accounted for 40 percent of Prada's 2 billion euro sales in 2010.

A successful IPO — designed to cut Prada's debt of around 1 billion euros and fund further expansion in Asia — would make Prada one of the most valuable luxury goods groups, but some fund managers balked at the price range.

"But luxury goods companies such as Prada have got good, visible top-line growth for the next 20 years. There are high barriers to entry as you can't go out and create a luxury brand from nothing."

In Singapore, about 60 investors and fund managers attended a lunchtime presentation by Prada's Chief Executive Patrizio Bertelli. Some expressed concerns about the pricing.

"There's no reason for it to trade higher than LVMH, which has a more diversified portfolio. Prada may be banking on the China story, but all the other luxury brands are also going into China and it's going to be very competitive and tough there," said one manager of a Singapore-based fund, who declined to be identified.

However, Prada may take heart from upscale clothing maker Moncler's decision, announced on Monday, to drop plans for its own IPO in Milan after it sold a stake to investment firm Eurazeo.

Some investors had said that competition from a Moncler flotation, together with the upcoming listing of luxury shoemaker Ferragamo, could have dented investor appetite for Prada's offering.

"Prada is a known name to Asian investors. I think the appetite for this IPO really depends on where the price will be within that range," Scilla Huang Sun, portfolio manager of the Julius Baer Luxury Brands Fund said. "This will also depend on market sentiment in the coming days, given that markets are a bit volatile now."

Prada, 95 percent owned by the families of Chief Executive Bertelli and his fashion designer wife Miuccia Prada, is betting on a boom in the consumption of luxury items in China, the world's second-largest economy, to lure investors to the IPO.

The IPO is slated to be priced on June 17 and the shares will start trading in Hong Kong on June 24 under the symbol "1913," the year the company was founded in Milan.

Prada and shareholders Prada Holding BV and Intesa Sanpaolo plan to sell 423.3 million shares, valuing the IPO at up to HK$20.32 billion ($2.6 billion).

About 14 percent of the shares will be sold in a primary offering with proceeds going to Prada, with the remainder of proceeds going to Prada Holding and Intesa Sanpaolo.

HIGHER VALUATION

A projected price-to-earnings ratio of 27 times compares with an average P/E of 26.2 times for Hong Kong-listed luxury goods companies such as luxury menswear operator Trinity Ltd and French skincare products retailer L'Occitane, Goldman Sachs Research estimates.

British luxury goods group Burberry, which was reported in the media to be seeking a Hong Kong listinng, trades at 21.4 times forecast 2011 earnings, while LVMH trades at 17.3 times.

Prada's IPO comes as a rout in commodity prices and debt concerns in the euro zone have eroded investor risk appetite, pushing global markets off their multi-year highs in early May.

On Sunday, startup miner Resourcehouse Ltd abandoned its fourth attempt to go public in Hong Kong.

GROWTH COMPANY

Prada started its business in 1913, when Mario Prada began selling leather bags, trunks and silverware to the European elite from his store in Milan's Galleria Vittorio Emanuele.

The company has since expanded throughout Europe, the United States and Asia with a product range that includes clothes, mobile telephones, fragrances and eyewear.

Profit more than doubled in the year ended January 2011 to 235.6 million euros. Prada said in a Hong Kong filing on Friday it expected half-year profit to rise 46 percent.

Italian fashion house Prada is pricing its initial public offering in Hong Kong to raise up to $2.6 billion and give the maker of luxury bags and Miu Miu dresses a value higher than its European peers, a source said.
Prada set an indicative price range of HK$36.5 to HK$48...